When the locals don't want your coal, sell it overseas

  • A dragline works at the Black Thunder Mine in Wyoming's Powder River Basin. The mine produces 65 million tons of coal per year, with an ever-larger portion expected to go to Asia.

    Melissa Farlow
  • Residents wear masks while exercising in Linfen in China’s Shanxi province, regarded as one of the world’s worst cities for air pollution.

    Peter Parks/AFP/Getty Images
 

The world's largest surface coal mine complex is a landscape unto itself. Six 200-foot-high draglines tear open the earth and scoop the black coal into gigantic dump trucks that make school buses look like playthings. Two dozen loaded-down trains, each a mile long, slide out of the mine complex every day, headed for power plants hundreds and even thousands of miles away. Big signs warn, "Blasting Area. Orange Cloud Possible. Avoid Contact." One gets the eerie sense that time has shifted forward to a dark, post-oil future, and, at the same moment, back to a more barbaric age.

This is Arch Coal's Black Thunder/Jacobs Mine complex in the Powder River Basin in eastern Wyoming, about 80 miles north of Douglas. It's one of about a dozen huge mines between Douglas and Gillette that together produce more than 40 percent of the nation's electricity-generating coal. These mines comprise what may be the world's largest single fossil fuel reserve. Wyoming's low-sulfur coal is shipped as far away as New Jersey, Georgia and Louisiana.

But with the future of the domestic coal market in doubt, there may be only one way to keep places like Black Thunder cranking at current levels: Get Western coal to the global market, a prospect that is already altering the battlefield over one of the world's dirtiest fuels.

Dozens of U.S. coal plants are nearing their 40-year-old retirement age, meaning they'll either have to be retrofitted with expensive pollution controls or shuttered. Already slated for shutdown are Boardman in Oregon, Centralia in Washington, 18 Tennessee Valley Authority plants and 6,000 megawatts of American Electric Power's plants. If the phase-out continues at this pace, it could cut U.S. coal consumption by well over 100 million tons per year, putting a dent in our 1 billion ton annual diet. And there's not much on the horizon to replace that market: Proposals for new power plants have run up against litigious warfare from environmentalists and a dearth of financing thanks to the potential for greenhouse gas emissions regulations or taxes.

As the locals get ready to go on a bit of a coal diet, however, the rest of the world appears to be eager to binge. High natural gas prices have prompted European utilities to buy more coal, some of it from here, driving U.S. exports from 60 million tons in 2009, to 82 million tons the following year. And those numbers could soon be dwarfed by demand from China.

China uses and produces more coal than any other country on the planet, and it's not in danger of running out any time soon. But getting coal out of the earth in China is a chaotic business. The mines are inefficient and isolated by railway bottlenecks. Coal truck convoys have reportedly caused traffic jams that take weeks to clear. China's mines killed more than 50,000 miners over the last decade, compared to less than 400 in the U.S. All these factors make Chinese coal very expensive, especially for the utilities on the coast.

So China has started shopping elsewhere, importing five times more coal this year than it did in 2008. "It just makes sense," says Mark Northam, director of the School of Energy Resources at the University of Wyoming. "You're starting to see the world buy its resources where it's cheapest." That includes Indonesia, Australia and Colombia, and also Wyoming,  which was able to enter the world coal market via a shipping terminal in British Columbia.

In order to open a bigger artery to Asia, Peabody Energy partnered last year with SSA Marine on a proposal to build a coal terminal near Bellingham, Wash. Arch Coal acquired an interest in a similar port at Longview, Wash., on the Columbia River downstream from Portland. And this spring, energy giant Kinder-Morgan announced it had penned a deal with an unnamed Colorado coal producer to ship China-bound coal out of its Houston port.

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The Global West: how foreign investment fuels resource extraction in Western states
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